terminating underfunded MP plan

[Santo Gold]

Company has a calendar year MP and SEP plan and they want to get rid of both. I'm told that the 2004 MP contribution has not yet been made (neither has the 2005, but there is still time for that). They will obviously have to fund the MP plan before terminating. Does this late deposit (for 2004 plan year) get reported on Form 5330 and is there estimated lost earnings that have to be calculated on it as well? Is this a plan defect that has to be reported via EPCRS?

Thanks for your help.

[Guest mjb]

The 2004 MP contribution was due on 9/15/05. The 10% penalty tax for failure to meet the minimum funding standard under IRC 4971 applies. The failure to make the contribution is a Prohibited Transaction under IRC 4975 because it is an extension of credit by the plan the the sponsor. PT will be reported on 5500. Need to review the instructions for the 5330 for application of penalities. The failure to make a required contribution has no effect on plan qualification. I dont know if earnings would be required to be made up under DOL procedure.